Stocks Gain Modestly as Investors Await August Jobs Report

NEW YORK ( TheStreet) -- Stocks posted modest gains Thursday on steady improvements in the labor market even as investors await an August employment report due Friday morning that may offer greater insight into the strength of the U.S. economic recovery.

Market participants are closely gauging employment numbers as the Federal Reserve has said the national jobs outlook will affect its decision on whether to taper its economic stimulus program.

"It would seem that good news will be good news overall for the market in the bigger picture," said Todd Salamone, senior vice president of research at Schaeffer's Investment Research. "Maybe not tomorrow, but I think what the market wants to see is if or when there is tapering we have an economy that can handle that."

The private sector created 176,000 jobs in August, less-than-forecast but well within the overall view of modest improvement in the country's jobless picture, according to payroll processor Automatic Data Processing. A 200,000 increase was expected according to a poll of economists by Thomson Reuters.

Economists are anticipating the United States to have add 180,000 nonfarm payrolls in August, according to surveys by Thomson Reuters and Bloomberg. Though many economists and analysts continue to forecast some form of central bank tapering, there remains skepticism amid the recent labor data.

"The ADP report says that, 'Look, we're still creating jobs, but the labor market is not growing at a robust pace,'" said Lindsey Piegza, economist at Sterne Agee. "You plug in the 176,000 jobs and that's the exact three month average that we saw last month ... so they're saying no change, and ... I suspect that the Fed is going to be erring on the side of caution and will not begin got taper until we see improvement."

Jobless claims fell by 9,000 to a lower than expected 323,000 from an upwardly-revised 332,000 for the week ended Aug. 31, according to Labor Department. Economists were expecting a slip to 330,000. The four-week moving average was 328,500, a decrease of 3,000 from the previous week's average of 331,500, the lowest level since October 2007.

In market news, Fastenal ( FAST) was the biggest gainer in the S&P, surging 6% to $48.60 after the industrial and construction supplies company reported that sales rose 2.5% to $297.7 million in August from a year ago as daily sales rates climbed 7.2%.

Nabors Industries ( NBR) jumped 3.5% to $16.14 after the oil and gas drilling contractor said that a subsidiary has agreed to sell $700 million in senior unsecured notes in a private offering. The company plans to use the proceeds, along with cash on hand and borrowings under a revolving credit facility, to buy outstanding senior notes due in 2019 and to make fee and expense payments.

Among retailers, J.C. Penney ( JCP) surged 5.3% to $14.22 extending gains from the prior session as the stock continued to garner attention after two prominent investors revealed that they've been accumulating stakes in the company.

The New York Post reported Wednesday night that J.C. Penney is ending its 10-year, $200 million deal with Martha Stewart Living Omnimedia, unimpressed by its designs and sales results.

The Institute for Supply Management's report on the services sector showed an increase in its employment index by 3.8 percentage points to 57%, indicating employment growth for the 13th month as the non-manufacturing sector continued growth at a faster rate. The ISM non-manufacturing index rose to 58.6% in August from 56% in July. A slip to 55% was forecast.

Factory orders fell by a less than expected 2.4% in July following an upwardly-revised gain of 1.6% in June, according to the Census Bureau. A 3.3% decline was expected.

Speaking at an economic indicator breakfast event in La Crosse, Wisconsin, Minneapolis Federal Reserve Bank President Narayana Kocherlakota said Thursday that the central bank should do a better job of communicating the future of its bond-buying program to the public and "that maybe this reduction doesn't mean as much as people think it means."

The benchmark 10-year Treasury was falling 24/32, pushing the yield up to 2.992%.

Monthly job cuts in August surged to the highest level since February, as U.S.-based employers announced plans last month to slash payrolls by 50,462, executive outplacement services provider Challenger Gray & Christmas reported.

Nonfarm labor productivity rose 2.3% in the second quarter, the Bureau of Labor Statistics reported. On average economists were expecting a rise of 1.5%. The report said that unit labor costs were unchanged versus the expectation of 0.8% increase.

The stock market moved higher Tuesday amid a stabilization in the Turkish lira, but TheStreet's founder and Action Alerts PLUS Portfolio Manager Jim Cramer urged investors not to get ahead of themselves.